Excerpt

Since January 20th of 1981, the regulatory environment in every sector of the American federal government (from consumer and environmental protection to every aspect of our financial institutions like banking, insurance and Wall Street investment and trading regulations) has been systematically weakened, all in the interest of strengthening and consolidating corporate power over the everyday lives of Americans, and to test neo-conservative economic theories of letting the “free market” solve all of American society’s problems. As we’ve seen one wave of financial shock after another blow through the American economy since then, and specifically witnessed each shock affect the financial markets with increasing volatility and culminating in 2007-2010 as the worst recession since the Great Depression, examination of the underlying causes has made it clear that nearly thirty years of deregulation of the financial industry was a huge mistake. During the latter part of the same period, mostly in the first decade of the 21st century, Wall Street and the financial brokerage industry have succeeded in tapping an enormous financial resource to exploit for additional profit. That resource is us. With the advent of electronic trading and widespread availability of the internet, they began offering and heavily marketing to average citizens systems enabling them to venture into trading and investing arenas that were formerly the exclusive domain of the very wealthy. User-friendly online trading platforms for personal computers sporting real time data and charting, provided free to customers compliments of online brokerage firms, carried the lure and promise of making money from the comfort of one’s own home trading stocks and their derivatives opposite the Wall Street “big boys”.

What they didn’t tell us was, the abysmal odds of success of the average citizen day or swing trading the financial markets would be a consistent and lucrative profit center for those big boys, and a cause of financial pain and in many cases devastation for the vast majority of aspiring day and swing traders. Many estimate the odds of a small participant making and keeping profit trading to be less than 15%, and many more cite statistics showing those odds to be as low as 1%. Which begs the question: why would a rational person not only venture into this work knowing she has an 85-99% chance of ultimately failing at it, but stick with that brutal work for years before reaching the point of capitulation and quitting – finally acknowledging to herself that which she had suspected all along – the markets are heavily skewed in favor of the well-capitalized insiders? Within the pages of this book I will provide answers to this question, hopefully doing so in a manner that will overcome the myriad of books, online brokers, internet-based trading-assist services and scammers that promote trading and steer you decisively away from the strong temptation to answer the siren call of trading the financial markets, and therefore protect your cash and preserve your mental, psychological, emotional and consequently even your physical health and well-being.

Trading stocks and their derivatives like options and futures is extremely dangerous, plain and simple. Only the well-capitalized insider traders residing at the stocks, derivatives and commodities exchanges and large brokerage firms consistently profit from that work. And as we’ve repeatedly seen in the years since the dot.com-precipitated crash of 2000, even long term investing in the financial markets can be perilous and detrimental to the longer term financial security of the average “outsider retail” investor. It is a myth that long term investing in the stock market is the best route to financial security and independence in your retirement years, a myth that is continuously propagated by the financial planning and brokerage industries. The crashes of 2000, 2001, 2002 and 2008-2009 that caused devastating portfolio value setbacks for the average investor provide ample proof of this.

Casino Wall Street recounts my experience of trading the markets for seven years, and of losing a small fortune in the process before finally giving up. Aside from the dismal odds of success for the average “outsider” trader/investor, all that I discovered about Wall Street should convince the reader that the financial markets in general, and Wall Street in particular, are nothing more than giant slot machines, and like any casino they are the very worst places in which to trust your money. In fact, you’ll learn that the word “trust” has no meaning and doesn’t exist in the vocabulary within the Wall Street culture and it’s practices. This book ends with a discussion of alternative investments that are very profitable and far better and safer than anything you could hope for struggling to extract and keep profit from the Wall Street insiders.

In Chapter One I provide an overview of what the financial markets are, how they work, and it covers some important reasons why it is so difficult to extract net profit when actively trading them. Chapter Two discusses the enticement, and the dangers of trading the so-called “derivatives” – options and futures contracts. After my first year of trading realizing a modest profit, it was these much easier to trade but treacherous leveraged trading instruments that portended the “beginning of the end” of my ability to profit in the financial markets for the remainder of my ill-fated trading career. Hence the title of Chapter Three, where I digress and for that and the next three chapters discuss in detail the many reasons why it is practically impossible for well over 90% of aspiring traders to succeed in this brutal business. In Chapter Six I return to my own experience to illustrate and drive home the toxic psychology and mental torment that is routinely evoked by the exercise in futility that is trading.

In Chapter Seven I discuss those alternatives to the financial markets that are consistently moderately to very profitable and light years safer. Finally, this book concludes with an epilogue that acknowledges the worst kind of loss that is a consequence of feeding the Wall Street monster (it is not financial), and ends with a plan for an American future without Wall Street that all of us can and should carry out to successfully rid ourselves of the monster.

Read more about Casino Wall Street: A Trader’s Seven-Year Education in Delusion and Deception and Mario Cohen HERE.

Copyright 2010 Mario Cohen. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, recording or otherwise, without the prior written permission of the author.

Excerpt

From Chapter 2: The Hidden Truth: It’s All Gambling

Why do you gamble?
- You like predicting the unpredictable.
- You like to make a lot of money with a little money
with no effort.
- You like to win.
- You think it’s your only hope to ever accumulate
financial security.
- It proves to others that you are willing to take a risk.
- It proves you are right, know what you are talking
about, and are willing to put something of value at risk to prove it.
- You like to beat the odds.
- You like bragging rights, superiority,self-esteem.
- You gamble to lose to increase the euphoria of winning.
- You, unfortunately, need to feed an addiction.
- The psychology makes it harder to walk away.

Here’s the thing: Casinos are promoted as pure entertainment, with no reason to promote themselves as something other than what they are. The markets, however, are promoted as performing an important business function with a vital economic value. In a casino, you are playing games marketed as a fun activity. No value attaches to the games themselves. You know that you are gambling, and the name of the game is insignificant. A poker game is a poker game. Roulette, craps, blackjack . . . they’re just games. They have no vital economic importance to society.

Las Vegas never denies that the casinos are primarily gambling facilities. Even with the best restaurants, star-studded shows, and luxurious amenities, you know upfront these are available to enhance the gambling environment to bring your money into the specific casino. You may enjoy these activities, but try as you might, you can’t hide the fact that you are at a casino to gamble.

To camouflage the market’s reality (that it’s a huge gambling casino) Wall Street managers needed to convince the public that people were actually investing to enhance their savings and promote the economy of the United States. This is a formidable task. Wall Street had to circumvent all of the entertainment and amenities that casinos offer and change your mindset to get you to believe that the stock market and commodity markets are a business function vital to everyone’s well being. You trust that you’re investing because you’ve been convinced the games are actually a legitimate financial venture.

To get you to believe you’re investing, the exchanges had to attach something of value to the names of the games. They took symbols that we believed were vital to our economy and used them as titles on their games (stock names, commodities,etc.). This allowed them to seduce the public into thinking they were investing in something of substance. In reality, they’d merely changed the title of the games, but it’s still the same gambling games that you find in Las Vegas. Either way, the key thing to remember is that the main element of all the games is that players or investors are trying to predict an unpredictable. And the odds are stacked in favor of the house.

A major difference between gambling at a casino and gambling in the markets is that the markets present advantagesto an elite few that the average investor doesn’t have.

In a casino, you may be treated as a high roller, with VIP treatment and access to parts of the casino that average people will never see. But at the end of the day, the games you choose to play for a high buy-in are the same games average people are playing on the main floor. On Wall Street, an elite few have access to inside information, a seat on the exchange, the ability to act on information instantly as opposed to when it hits the public, and access to information that the public doesn’t receive. Some of this is legal, some not. All of these advantages result in an increase in the odds in favor of a select few, to the detriment of average investors.

There is a strong natural tendency for you as an investor to ignore your losses and focus on your winnings. Casinos encourage this tendency by making sure that every quarter won in a slot machine causes lights to flash and makes its own little jingle in the metal tray. Seeing all the lights and hearing all the clinking, it’s not hard to get the impression that everyone’s winning. If you watch the floor of the New York Stock Exchange, with all of the yelling and running around and the flashing lights and the stock ticker, one cannot help but be caught up in the excitement thinking that fortunes are being made on the floor.

But losses are mostly silent.

Copyright 2008 T.E. Scott. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, recording or otherwise, without the prior written permission of the author.